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ECB Confronts Weaker Economy, Stronger Euro: Decision Day Guide – BNN

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(Bloomberg) — European Central Bank President Christine Lagarde will have to walk a fine line on Thursday as she portrays a euro-area economy that’s recovering as hoped from the coronavirus pandemic yet still in need of massive support.

While new economic projections will confirm that the worst downside risks haven’t materialized, they’ll still be bleak and subject to high uncertainty. Lagarde also now has to deal with a stronger euro that could hamper the upturn.

Read more: ECB Forecasts Said to Show More Confidence in Economic Outlook

The Governing Council is expected to keep its 1.35 trillion euro ($1.6 trillion) emergency bond-buying program and record-low interest rates unchanged for now. But the president will be quizzed in her press conferences on market expectations for more stimulus later this year.

More Stimulus

The pandemic emergency bond-buying program is set to run until the middle of next year and economists predict another 350 billion euros will be added by December. They also expect purchases to be extended by another six months.

Among policy makers, different views on the direction of stimulus have emerged over the past weeks. Bundesbank President Jens Weidmann is campaigning to withdraw emergency support once the recovery from the pandemic is complete. The program is “limited in duration and clearly linked to the crisis,” he said.

Chief Economist Philip Lane has stressed the ECB is ready to do more if needed, and argued that once the economy has overcome its immediate shock, fueling inflation will become the next priority. The institution is buying an additional 20 billion euros a month in bonds as parts of its quantitative easing tool that was restarted last year.

What Our Economists Say:

“The Governing Council may indicate next week that downside risks have intensified, signaling monetary policy could be loosened further before the end of the year.”

–David Powell and Maeva Cousin. Read the ECB PREVIEW

Euro Strength

The ECB’s job is being complicated by a strengthening euro that risks damping already feeble inflation by making imports cheaper. The currency broke through $1.20 last week for the first time since 2018, before Lane knocked it back saying the exchange rate “does matter” for monetary policy.

Lagarde may try to reiterate this view, but the ECB’s scope for action is fairly limited. Its deposit rate is at -0.5% and has been negative for more than six years, leading to complaints from banks and savers.

Nomura strategist Jordan Rochester said while attempts to talk down the exchange rate should help in the short term, it’ll be difficult to break the euro’s upward trend.

Outlook Update

Some policy makers have become more confident in their forecasts for the region’s economic recovery, according to people familiar with the debate. The latest projections for output and inflation will show only slight changes to the June outlook, with GDP for this year set to be revised up.

That perspective meshes with economists’ views. Most predict growth forecasts beyond 2020 will be largely untouched, as cheaper oil prices help offset the currency’s effect on export demand.

Strategy Reviews

Another topic Lagarde is likely to be asked about is the Federal Reserve’s new framework, which allows the central bank to tolerate faster inflation after periods of weakness. If that keeps U.S. monetary policy loose for longer, pressure on the ECB to do the same could increase to keep the currency in check.

The ECB is in the process of overhauling its own strategy — for the first since 2003 — although results aren’t due until the middle of next year.

“It’s a good thing to have a strategy review of monetary policy,” Governing Council member Francois Villeroy de Galhau said in response to the Fed’s decision. “You can be reassured that a credible and symmetrical inflation objective will remain at the heart of our action.”

©2020 Bloomberg L.P.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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